Back to the future… depends on today

Back to the future… depends on today

Leopoldo Mitre – November 2, 2015

A powerful information system is like Dr Brown’s DeLorean. With it, we can go back and look into the past to make predictions based on reliable information.


back-to-the-future-depends-on-today

At 4:17 PM October 21 should have arrived from the past Marty McFly, accompanied by Dr Brown to the imaginary town of Hill Valley California, with the Mission of changing the future of his children and family. Almost as prophecy, newspapers around the world take note of this: El País titled “Welcome to 2015, McFly”, the Excelsior in Mexico devoted a special supplement and even USA Today replied the October 22 cover of Back to the Future II.

And the fact is that after almost thirty years of waiting many of us joined the celebration and rememberance of BTF. In all the globe mass media, users of social networks and also famous brands, helped us to remember the moment in which the personages of the trilogy Back to the Future travel from 1985 to 2015. But especially, we love the idea of comparing how much the future of Marty looks alike with our current present.

Back to the Future was not only a huge success at the box office, also became a cult film. The reasons can be many and difficult to determine, but it is undeniable that the proposal on how would be our future was an element that captivated a large number of followers at the time and returned to awaken the interest of the masses 30 years later. But, at the end, and after everything it was only fantasy… or not?

It doesn’t matter if it’s fantasy or prophecies, but everyone likes the idea to be able to predict the future and anticipate it. What about having, before anyone else, the idea of a great business that will make us rich and famous? For me for example, just as Marty McFly, to have the opportunity to buy an almanac with the results of all the sporting events in the next 30 years would be amazing. With that kind of information I could amass a fortune as Biff Tannen in the alternate future of Marty! But also I would be pleased to have an oracle crystal ball to know the exact dollar exchange rate for next year, or the result of the presidential election or at least what to buy for my wife in our anniversary.

Given that this is not possible, the only way of anticipating the future is creating it. We can build it in such a way that it seems that we are only returning to it. This sounds very good, but how to achieve this?

At childhood we asked ourselves how would our adults life be. Then, as adults, we ask ourselves how will we be when elder, and at the end of life we question what would have happened to us if we had known what we know today. Success seems to be summarized in choosing the right decisions. However, to know with precision the future is impossible, so all seems as a game of guessing where the chances of winning are matter of luck. Or at least it seems to be.

It can be, but at least in business, luck is not required. Only reliable information to plan, even to imagine and speculate, based on what we know. As a company leader, the quality of information that we have at the moment of making a decision is the difference between success and failure. The better the information, the better will be our probabilities of being right on the future. So the question would be: how can we have reliable and instant information if we do not have a flying DeLorean?

The only way is to know more than the rest, at the point that we can anticipate “the move” of our opponent. In economics the term that best describes this situation is Perfect Information in the Game Theory. ‘Game’ could be defined as “any decision problem where there is more than one agent decision maker and the decisions of a player have effects on the other”. And Perfect Information as the moment when a player knows everything that might want to know about what has happened, since the beginning of the game, and the result of their elections assuming a rational behavior of the counterpart. However in reality it is almost impossible to have Perfect Information, in addition to that the market rarely is rational.

So our best option is to have a method to make us of timely and reliable information, that although imperfect, can give us a prediction close enough most of the times. In companies, this method would be the correct implementation of Information Technology (IT).

For example let’s imagine that we are in a tender, a situation where the interests of the actors are totally or partially opposite -what makes it more interesting in a Game Theory analysis- and where a determinant factor to gain the contract is the offered price. So to know the number that the rest of the competitors will offer would be the equivalent to count with perfect information. Nevertheless, of ethical and legal form, to know the offer of the competitor is not possible. But although we could not predict what will our competition do, and if it´s going to be rational at the moment of offering or not, we can control the costs and benefits: the main variables for the construction of a highly competitive price that increases our probabilities of winning without losing.

To win with the lowest price sometimes is to lose. If we do not know safely our margins and the costs fluctuancy is probable that in the end we have to put from our bag to expire with the agreed price, still without knowing it. It looks like a prank, but in more than one occasion I have seen some companies that are selling products or were establishing prices that provoke losses, simply because they did not have the reliable and opportune information about its structure of costs. In these cases, to speak on the prediction of the demand or market intelligence is slightly futurist. And Big Data completely out of its reality.

However, having predictive information is not impossible. In fact the first step to make us reliable and timely information is to establish efficient processes, at the same time that we implemented information systems to cover our core operations. When these two things are done in sync the effect is exponential and without realizing we are building our own time machine that will allow us to see the future based on our past and present information.

A good Information System might be as Dr. Brown’s DeLorean. With it, we can see the past and make predictions based on reliable information: anticipate the customer order and ensure prices of inputs according to the behavior recorded in the system of inventories, lower margin to win market share supported in financial reports or make configurations of seasonal packages that will be a success based on the statistical information of CRM.

So you already know it, to return to the future you do not need luck, you need to construct it today, so that you can return in just a matter of time.